Good morning. We would like to welcome you very cordially to our earnings report conference. We're gonna talk about H1 2022. We're meeting here in very interesting times for the industry. We're going to speak about the current time, about the future. We'll talk a little bit about the past in terms of what has transpired in our bank in the last six months. We have a typical agenda, so I won't mention everything. We can go on to the merits, the most information, the most important information. As is clear, in Q2 of this year, the bank generated a net profit of PLN 258 billion. This is down 7% from Q1, but it's much better than the corresponding period of last year. I think this is a robust result.
It's not a phenomenal result, but having regard for the circumstances, the additional burdens, I think it's a very decent result. We've been growing in terms of our lending activity, both on a quarterly basis as well as on a year-to-year basis. Our revenue is up by 7%, and this is because of net interest income. We had a very good FX result and a stabilization of fees. If we look at our activity, there are a few things I'd like to mention. Everything else is listed in the slides and the materials. We believe that our agile transformation is going well. The work in this format is fast, dynamic, it's engaging. We're able to give various solutions, roll them out more quickly. They're dedicated, and this is something that's positive. We focused on sustainable development.
On the next slide, we'll talk about some of the numbers. We have PLN 5.1 billion of new green financing. This makes us one of the leaders on the marketplace. This is something we want to maintain and strengthen. We can see that our customers are more active in digital channels, so we're more technologically involved. We have a good result in terms of attracting new clients, also record-breaking in terms of corporate clients. We have clear revival, recovery in SMEs, so we can say from the business and commercial side, for the bank, this was a good period. I mentioned the volume of green loans.
This is the work, the result of the intense work done in all of our, client-facing departments who are working with, big customers, individual customers, and I think we still are the first bank to offer mortgage loans for a fixed rate for a 10-year period. This was a clear response to the expectations of customers and the regulators in order to ensure that customers do not face interest rate risk for the longest period of time possible. Of course, we'll come back to this. We had several big corporate transactions, and so we are strengthening our position as one of the leaders in terms of structured financing as well as M&A activity. Here, as a team and the volumes of transactions, the number of transactions are stable, and this is clearly growing.
As you know, the beginning of the war in Ukraine, we were quite active when it came to refugees and our employees of our sister bank. We opened, we are opening and continue to open dedicated accounts for Ukrainian nationals. We believe that we should provide them very good conditions for cooperation with the bank to ensure that they feel, at least in this aspect, very good in Poland, very well in Poland. I mentioned about the absorption of digital channels. We have more than one million users of the digital applications. In our remote channels, we're automating also processes in terms of customer inquiries and requests, and so there's a lot of progress. We have more and more bots, robots handling processes in the bank. We're talking about, you know, these credit holidays, and I'll talk about those a little bit later.
What else can I say? If we look at other pillars of our strategy together, I've mentioned agile. Everything's going well here. I'm also pleased by things like appreciation for the fact that we look at diversity and inclusion. We're emphasizing it. Perhaps this could be translated more differently and both internally, and we want to make sure that our customers, regardless of how they differ, we want everybody to feel well in our bank for them to have equal access. We have certification of access in our branches to all customers, regardless of the type of difficulties and obstacles they face. If we look more specifically at the figures, you can track some of the trends. We can see the number of GOmobile users is growing very strongly, and so it's a friendly application. I use it, we're developing its functionality. We have peer-to-peer BLIK.
We have a large number of customers are happily using that and willingly using that. You can see the number of BLIK transactions is growing rapidly, 22% up Q1 from quarter to quarter. This shows that this has had been noticed and appreciated. If we look at retail banking, we can say that the total result for the two quarters, first two quarters is very robust, even though one was better than the other. We can see that the interest in funds, investment funds is soft because of the growth in interest rates, so there's nothing to brag about here. If we look at the sales of cards, we can say this is quite robust growth, and that's good.
This is a product which is attractive to customers, and at the same time, it generates profits for the bank. If we look at other forms of lending to individual customers, we continue to see that cash loans and similar loans are continuing to grow, but we have a clear decline if we look at mortgage loans. This decline, there's no secret. The secret or this decline got even bigger after the close of the first half of the year. This is a clear trend on the market. This is a result of the higher interest rates, which are curtailing demand. We also have the burdens of this specific product, the regulatory risk, when we have credit holidays or loan holidays, which is something that's painful to the industry.
I mentioned the record-breaking numbers of institutional clients that have been attracted, so in corporate banking and SMEs. We're clearly moving forward here. We were talking with our managers yesterday, and the bank is standing on two very strong legs. The retail leg, including personal finance, as well as on that institutional leg, where we have EIB and corporate clients as well as then SMEs. Our market shares have risen in loans and deposits, and this shows that the bank was in an upward trend. The number of customers is up more than four million customers. This is very important to us because growth can be achieved by adding new customers and then expanding the scope of services offered to them. That's something that's happening in the bank. The net banking income is nearly 7% quarter-on-quarter in Q2.
Well, it's 36.2% year-on-year. This result is relatively lower, especially year-on-year, compared to our competitors. This is a result of the fact we have been very conservative in terms of the security for interest rates on our portfolio, and that's something that's generated a result here. If the trend reverses, especially with interest rates, then we're gonna lose less compared to other banks that have a different hedging policy. If we look at costs, we have the IPS component. The formal number, this is the commercial banking system protection, but we can call it SOPK or IPS. Basically, we make payments to that institution of PLN 180 million in Q2 of this year. If we overlook this one, costs would have grown less.
There's also cost pressure linked to inflation. We're monitoring that situation, and we're actively managing that. We'll continue that. With certain cost items, there are not many things you can do, especially like energy costs. In Q2, we've added provisions for the Swiss franc risk, PLN 140 million more than in Q1. Having this coupled with the IPS effect, that means the profit, recorded profit is lower by 7% than in Q1. If we were to, of course, adjust for that Swiss franc impact, it would have been higher. PLN 250 million net profit in current reality is a very robust result. I hadn't said that previously, but I wanted to say that. Maybe a few ratios which are very important.
The cost of risk, we can say that the situation is very much under control. We believe in the quality of our portfolio. This is marginal growth. In Q2, it's more or less the same level. Even though we have the slowdown in the economy, we don't see a threat to our portfolio. Of course, Mr. Kembłowski will speak to that in just a few moments. The ROE in H1 is 9.6%, so it's a little bit lower than in Q1. We have to remember, the IPS is PLN 180 million cost, and then we have higher provisioning for CHF, for Swiss franc loans. Then we have the cost income ratio is essentially without any change. There is cost side pressure. This is something that has made it more difficult to improve that ratio.
Where are we, generally speaking? Ladies and gentlemen, I mentioned we're in a very interesting point in time for the banking sector. I believe we're also in a very difficult moment, and a number of factors are taking place. At the same time, these are macroeconomic factors. We have economic slowdown, a recession on the horizon, high inflation, and as a result, high interest rates. There is inconsistency between the monetary policy and the fiscal policy, which makes it more difficult to manage such high inflation. We know it's much higher than other close countries. If we look from the left side. We have the IPS. The cost of IPS is significant, but the idea of building a private system to protect commercial banks is a good idea. Our bank is involved, and has been involved in this project from the beginning.
It's a grassroots initiative, banks in the sector, so private banks, as well as banks controlled in one way or another by the state treasury. It's good that this institution is being set up, and this will make our sector more stable. This is a charge to this year's Q2 results. We have credit holidays. I'm not going to say much about what they entail, because that's something that everybody knows. I believe and have believed from the very beginning that it's bad to roll out credit holidays in this way. It's socially unjust, as well as when we talk about trying to maintain the strength and stability and soundness of the banking industry. These credit holidays are available to all borrowers.
People, borrowers who have difficulties as a result of higher inflation and maintaining their budgets, as well as it's offered also to those people who are very wealthy. They've bought exclusive properties and expensive. It's also available to people for people who've taken out fixed interest loans when interest rates were very low. It'd be very difficult to justify why those customers should receive assistance or relief from banks and their shareholders, and their situation hasn't changed. These are customers who are paying 2.5% per annum. Well, if we look at interest rates right now, that's a very attractive level. Directing assistance or aid to those persons is something that's improper. One can, of course, enter into polemics about the number of installments that could be suspended.
I'm afraid that this initiative, generally speaking, will have an adverse impact on the ethics of discharging liabilities, because it shows that financial liabilities do not always have to be paid down at the contractually agreed deadlines. That suggests they don't have to be paid at all. I'm troubled by this. The entire sector is troubled by this. In our statements, we wanted to civilize these credit holidays and direct them to people who need them, and our voice was not heard. We continue to hope that there will be no other ideas leading to similar repercussions that would be implemented through legislation. As you know, the credit holiday estimate for us, the cost of that, PLN 700 million-PLN 950 million.
We're gonna monitor this situation as we post PLN 700 million, and depending on how things develop, we'll adjust the posting here. We have additional money for the Borrower Support Fund. This is something that's been around since 2016 and hasn't been used practically at all. The number of customers interested in utilizing this support is on the rise. That's why the fund was set up. We have the Swiss franc here. The situation is very chaotic. That's why we're monitoring it regularly, and we're adding re-provisions every quarter, in fact, in order to build a buffer for this situation. It's clear that systemically many things have not been regulated, and so this chaos leads to concern, and that's why we have this approach of setting up provisions. You have the benchmark reform for WIBOR.
You know that Prime Minister announced this at the Katowice conference in April. This was very vague. Now as more and more details are coming out. Nowhere else in the world has such a benchmark reform been done in this period that the Prime Minister has defined. The Polish Bank Association is participating in that. People from our bank are also participating in this. We're hopeful that we're gonna be able to convince all of the stakeholders that this reform should not take force as of 1 January of next year because it's undoable, it's unfeasible. It will lead to chaos in the Polish financial system and the external world. These things should be done in a cogent fashion, well thought through.
Methodologically, they should be done conscientiously, and the period left up until the end of this year will not allow for that to take place. I'll end this part of the section with a reflection in terms of the circumstance in which we're functioning, and I'll support this with some numbers. Ladies and gentlemen, since 2016, the bank has paid some PLN 4 billion in fees, dues, taxes to the various state treasuries. Of course, we haven't paid a single złoty of dividend, and the situation is that the likelihood of paying a dividend is very low. The conclusion is, realistically, the legal and economic framework that's been created in Poland, to speak as gently as possible, is not fair, not just for investors, for shareholders, for banks.
I think one should think about that in terms of the narration which is being put forward around banks. I think it's a very aggressive, unjust, unnecessary, in which we forget about the role played by banks in the economy, what role they should be playing in difficult times, and how they should support the economy when the economy is emerging from a difficult period. I think we're decent people. We've done a lot of good. We've made mistakes, but well, fundamentally, we do not deserve such a narration or such a situation. Let's go on and look at the macroeconomic environment.
Thank you very much. Ladies and gentlemen, good morning. The environment is deteriorating, and we're moving into a period of recession.
If we look at the accounts from the National Bank of Poland for Q2, they show a shrinkage of the economic activity over the last three months. All of the indices available suggest that this decline will be continued in the current quarter and probably in the subsequent quarter. On top of these environmental or the cyclical things linked to the structure of our GDP, looking at inventories, one of the most important factors in terms of the length or the depth of this slowdown. This is the supply of energy carriers, such as natural gas for Poland and EU. This is an important factor. At present, there's no good response whether or not that supply will be available, and if so, to what extent. This is something that we will pay attention to in subsequent months.
Unfortunately, this recession, upcoming recession, is accompanied by high inflation. It's not only because of high supply side factors. We have domestic factors as well. They're not just external. We have very high nominal increase of wages. The fiscal policy, not very strong, and this is contributing to this. In subsequent months, this will continue to be the case. It doesn't make it easier for the central bank or for the Monetary Policy Council. The inconsistency in terms of the policy mix is very important, and it's very significant and very bad in these uncertain times. This cycle has been in place for some time in terms of tightening monetary policy. We're certainly closer to the end of this cycle than we were at the beginning.
That does not mean, however, that the interest rates will stay at the current level. On top of the macroeconomic factors, so inflation, economic growth in subsequent months, we'll have to pay attention to what the conduct will be on the financial market, including the FX market. If we look at the last 15 months or so and what the Polish złoty has done, it's hard to resist the impression that everything's okay. In terms of the fundamental factors, we have to have in mind that the fundamentals will get better from the FX market point of view, and this will be an additional factor, making things more difficult to pursue economic policy, including monetary policy. Last but not least, from the point of view of the banking sector, what does this macroeconomic environment mean? It doesn't mean good times. It means more challenges.
It means more difficulties. It means more concerns in terms of the pace of lending activity. If you look at retail loans or household loans, the slowdown or the decline in demand, well, the signs are very clear. This recession could affect corporate loans demand, which had been growing very fast in the last several months or 12, 15 months. This proposed growth rate could be softened.
Good morning. Of the year, we deliver solid financial result despite the headwinds and the creation of IPS. It will help us to cope with the new challenge we will, which will occur in the second half of the year. I'm referring to the first one, which is credit holidays impact is going to be huge for the banking sector and for the bank as well. In terms of business, very good performance for the business. Our loan book grew by 14.2% year-to-year. We strengthened our deposit base, which grew by 13.6%. Capital decreased by 8% as impact of the negative valuation of the bond portfolio. Tier 1 close to 11%, 10.99%. I will speak about it later. ROE 9.6%.
Net result PLN 535 million, up by 81% year-to-year. If we are excluding the impact of CHF, up by 37% year-to-year. NBI PLN 3 billion, up by 31.9% year-to-year. The main driver being the net interest income resulting from the positive impact of interest rate hike and the growth of the loan book. Good performance in terms of fees and commission, which grew by 19.8% year-to-year. As a consequence of the normalization of the cost and also the creation of IPS, cost grew by 31.2% year-to-year, excluding BFG contribution on IPS, the cost grew by 14.6%, decreasing the cost income ratio. We keep on increasing the coverage ratio in terms of CHF mortgage loans.
We book additional PLN 223 million, and the quality of our portfolio is stable. No, no deterioration of portfolio. Cost of risk PLN 165 million. As regards our loan book. Overall, loan book grew by 14.2%. On one hand, very good resilience of the institutional customers loan book, which grew by 15.7% year-over-year, another very good quarter, plus 3.2% compared to the first quarter. As regards individual customers loan books, the situation a little bit different. Year-to-year positive growth, so 12.1%, but we are still getting some signal of slowdown, and quarter-over-quarter, the loan book grew by 1.8%. In terms of market share, we reached 6.2%.
As regards the CHF mortgage loan portfolio, we are keeping on increasing the coverage ratio, so we book additional provisioning. The provision reaches a level of CHF 1.5 billion. Coverage ratio grew to 34%, which is in the market. The good news is that we are still keeping on negotiating with our customers. Already close to 800 customers agree about the proposal, and the negotiation has been totally finalized and completed with 564 customers. In the first half of the year, we have decided to strengthen and to stabilize our deposit base. Deposit grew by 13.6%.
Recently, after the stabilization, we have decided to optimize the structure of the deposit and which is explaining the new trend quarter-to-quarter, meaning that individual deposit grew by 6.4% compared to the previous quarter, and in the second quarter, a slight decrease in terms of institutional customer deposits. The mix in the deposit is also changing as a consequence of interest rate, so the share of the term deposit is increasing. As a consequence of interest rate hike, investment product are significantly impacted. Year-to-year investment product decreased by 38.4%, and quarter-to-quarter, 14.9%. Net interest income.
Net interest income grew significantly year-over-year, +44.3%, the main driver being the growth in our loan book, increase in the interest rate, but we have to refer also to some additional parameters, such as our hedging strategy, which is impacting the evolution quarter-over-quarter and also year-over-year. As you can see, we are also gradually adjusting the cost of the deposit. The cost of deposit increased in the second quarter compared to the first one. The margin, net interest margin is increasing and reach a level of 3.29 in the second quarter. Very good resilience in terms of fees and commission. We deliver another very good quarter.
Year-over-year, fees and commission grew by 19.8%, which is a good performance, and we perform in all the segments, all the activities. Q2 compared to Q1, -1.9%, which remains a very good level. In terms of net trading income, year-over-year, -18.7%, but we have to take into consideration two components. The first one is coming from the very good performance in terms of transactions with our customers, which grow significantly and reach a level of CHF 156 million in the second quarter. In parallel, we have another phenomenon, which is coming from the cost of FX swap, which is explaining the decrease in the net trading income. Another negative parameter, which is coming from the negative valuation of equities.
In terms of net investment income, slight decrease by 23.7%, which is coming from the lack of sales of bonds in 2022 compared to 2021. Cost grew by 31.2%, resulting from the normalization of the business, normalization of the cost such as BFG, IPS creation, and also the level of inflation. Excluding BFG and IPS creation, the costs are growing by 14.6%. Quarter to quarter, the main driver of the growth were the legal cost and also some consulting and IT cost. What is important is that we are keeping on changing our business model, and as you can see, the level of staff is decreasing quarter to quarter, and we are keeping on working on this topic.
Good morning, ladies and gentlemen. Q2, if we look at the cost of risk, is 37 basis points, and it's not a very big difference from previous quarters. What's more important here is what we have inside that, because the changes are quite substantial in terms of that PLN 37 million. We had the release, the reversal of COVID, which we have some things that didn't materialize. We made the decision that we shouldn't maintain that any longer, so that's a reversal of PLN 200 million. We have PLN 27 million as a result of implementing, of having LGD lifetime approach. A portion of that was qualified as belonging to phase two. We have a positive impact of PLN 15 million as a result of selling a non-performing portfolio, and then we added PLN 15 million in provisions for Swiss franc loans.
We're talking about loans that are undergoing restructuring and recovery. The performance of credit risk, the overall portfolio is good, but we're talking about the legal risks linked to this portfolio. Generally speaking, we can say, this is where we could end, but thinking about what else could happen in the not so distant future and how the economy might function in terms of the growth or the lack of growth, we'd like to anticipate what might happen. We've selected a group that could have problems, potential problems. We've put it into phase two in terms of the level of provisions. It's CHF 2.285 billion. These are customers who are operating normally, but they're at risk of high energy cost increases. We're talking about anticipating things and not about the materialization of provisions.
What else have we done? We've looked at the potential change in macroeconomic inflation, change of interest rates, or severing supply chains, and what could happen with PD, mainly in terms of various portfolios in the bank. Here, we've been anticipating another PLN 128 million of provisions. As a result, we have to think that the PLN 85 and PLN 128 million, this is not something that has materialized. This is more of an approach like we had with COVID, but for different reasons. Now, if we look about or think about where we are, what we have in front of us, and looking at the NPL ratio of 3.2%.
You can see the limited amount of new defaults in all segments up until now, and good restructuring of the current portfolio, which means that at the end of the day, we have nominally an NPL portfolio of under PLN 3 billion. We can say that regardless of the customer segment, everything is operating well and correctly. If we look at the various phases, this is only phase two, this is where we actually did basically some changes, and this was a deliberate decision. This is something that we've done. In each one of the segments of the client, we've improved. Coverage continues to grow because new defaults are a very finite quantity, very low. The portfolio is getting older. The older it is, the level of coverage grows.
Because we added PLN 150 million provisions, and so we're above 60%, and we believe that this is a very safe level.
What about the capital ratio? During the first part of the year, capital ratio decreased. I'm going to focus on Tier 1, which is a level of 10.98%, which is a weighing on one side, an increase of the business and the growth in RWA, and a negative impact coming from the revaluation of the bond portfolio. All in all, capital ratio are still well above the minimum capital requirement, which is the most important.
Ladies and gentlemen, we're coming on to the end of the presentation, and then we can go on to the Q&A session. I'd like to say, when we talk about the amount that the bank has paid since 2016 for a variety of burdens, I said millions. It's actually more than PLN 4.7 billion. The amount figure was correctly given on the slide. What awaits us, certainly uncertain times. Uncertainty for a variety of reasons, the geopolitical situation, the macroeconomic situation, inflation, and what's gonna happen with inflation, these credit holidays. But they've only been in place for some two weeks, and so how they will roll out and their impact on the banking sector is something we don't know yet.
We have more uncertainty linked to mortgage loans, FX loans, and a challenge is the decline in capital as a result of these revaluation or remeasurement of bonds, portfolio, and treasuries. This is important when we think about the capacity of the sector to finance the economy, and then we have the reform of benchmark. I hope that we're gonna be able to utilize a more reasonable framework. I'd like to say two things. First, our bank is an organization that's gone through a major transformation. We've gotten much stronger. We've shown our capacity to generate a bigger income on our base, and we have that capacity to grow. Had we not gone through all that in the past, then our ability to absorb what we're going to face would be more limited. Now we're able to absorb what's happening.
We believe that even in a very difficult time, a well-prepared organization can grow market share and can go through difficult times in a pretty decent shape and can get stronger than its competitors. We believe, or I believe that we are such an organization. My second reflection is that having in mind what's happened recently with these credit holidays above all, the banking sector is in such a state that it will not be able to endure any other ideas like this. I'm imploring those who are responsible for this to be very reticent coming when looking at new ideas that could compromise the strength of the banking sector in terms of how the banking sector treats and serves individual customers and institutions. This is our task, our responsibility, and we want to do this properly.
That would be more or less it in terms of the material we wanted to present to you today. We have other information in the materials, so I think we should go ahead and move on to the Q&A session. We can start the Q&A session with a question about whether it's the question from any of the people who are present here in the room today. We have a large number of questions from people who are participating remotely.
I'm from Puls Biznesu. My question is about the dividend as a result of the fact that you've not been able to pay a dividend for so many years. The macroeconomic conditions are worse and worse. For how many more years can we forget about entirely that you're gonna pay a dividend? Thank you.
We're not forgetting about the ability to pay a dividend. We think we should pay dividends to our shareholders. It's very difficult to say when that time will appear that the bank will be able to pay a dividend responsibly, and of course, sharing the right level of profits with its shareholders.
Adam Zborowski. I'm from Others. I wanted to ask about the corporate credit loans, about the future there. What sort of decline do you anticipate? You said you expect some declines, and what about the quality of the portfolio? If I remember well, in Q2, it was slightly increased in NPLs for farmers. One more question. Could you give us some numbers about how many applications have you received for these credit holidays, if you have that data? How many have you received so far, and also from this, Borrower Support Fund?
I'll start with the corporate loans, and from the second part of the question, we believe that the corporate portfolio has very good quality. Our customers should be able to make do, navigate the economic slowdown. We do not anticipate a material increase in the cost of risk linked to this portfolio. In terms of the decline, I think as follows: The upcoming quarters will be a special challenge for retail customers, especially for mortgage loans. I don't anticipate that this market will be big. I believe that if we look at corporate customers, a lot of things will be happening. I think that in upcoming quarters, the corporate business will be the business that will continue to be able to grow.
This doesn't apply to all companies, but to the stronger companies, they might be able to take advantage of the situation in order to grow their market share and to do M&A activity, and we're totally ready to do that. If we look at the credit holidays, there's a lot of questions about credit holidays, also from the online. I'll try to respond to that once. First, let me remind you that we haven't been dealing with this for a full two weeks in terms of the time that these credit holidays are available. The number of applications is in line with our expectations. I'd like to emphasize that we're actually processing them very smoothly. We haven't had any stormy times, it's all being done online. Customers are communicating with us by online, and we're actually handling and processing those applications smoothly.
What the final outcome will be, nobody knows. As you know, the largest number of these credit holidays applications. The first day when it started was the 29th of July. That's when we've seen the biggest number of applications. Since then, we've seen a decline in the number of applications. I think we need more. A longer observation period in order to be able to say how many applications will be filed or submitted and what will be the total cost of these credit holidays. If we think about the number of applications for the Borrower Support Fund, this is a relatively small number compared to credit holidays. Of course, it's substantially bigger than it was in the corresponding period of last year. I'm not sure if we should quantify that. 221 applications this year.
Thank you.
I remembered 200. I didn't remember the end. That's the magnitude of this phenomenon. We have money in the Borrower Support Fund. We'll have to add money. I think I responded to all of your questions, so thank you.
I'm from Business Insider , Maciej Łuczak. I wanted to ask. I have three questions. Can I ask all of them? Let's go ahead and try that. My first one is about the interest margin. Is this the peak in terms of what's happened with deposits and interest rates? The second question is about the coverage ratio. It's, like, 33% right now. I wanted to say, how much will it grow? It seemed at one point in time that that would be the optimum level. The third question is about the capital situation. In terms of Tier 1, it's falling, your Tier 1. The question is there a risk that you're gonna have to raise equity in terms of increasing the free float that the bank has to expand by the end of 2023?
Maybe I'll begin in terms of the final question, and then I'll ask Jean-Charles to add some words in terms of what's important. We don't see any risk which would cause us to breach the equity ratios, which would lead to a necessity to raise equity. We're gonna continue doing activities which will optimize the utilization of the equity, the capital, and our forecasts show that we should be on the safe side, so we do not plan to raise equity in the foreseeable future. The first question was about the interest margin. The second question was about the coverage of the Swiss franc risk.
I don't think there's a person who could tell you what level of coverage is the right level, finally. If we look at the level of coverage amongst the Swiss franc banks, we have a higher level of coverage, but at the same time, participants in this game are continuing to bump up that coverage ratio, and this is something that we'll probably continue to do but maybe not the same level that we saw last year. Much depends on what happens, the development of these pilot settlement agreements. We're doing better and better here. We're doing it more and more efficiently, and this is starting to have material impact in terms of reducing the Swiss franc risk. Now, is the margin at the highest level, do you think?
One factor to take into consideration, what will be done in terms of future interest rate and also the pressure we have on deposit. We saw in the market that there is a pressure in terms of cost of deposit. Today it's early to say this is a peak or not. We have a few phenomena to monitor.
Generally speaking, we can say, we'll see. There's pressure on deposits. We don't know what's gonna happen with the interest rates, so we'll see.
I'm from Santander. I can hear you. My observation. Generally my question is as follows: What sort of competitive edge does your bank have over other banks that's enabling you to grow more quickly? And then I have a more detailed question about the corporate segment and whether stopping to sell mortgage loans to external customers is that something that's significant? Is that gonna have a major impact on your sales? And I might have another question.
The competitive advantages we have. Well, this is a longer topic. We have a growth strategy, and we've clearly said that we wanna grow, and we wanna grow in all market segments.
That's how we're managing our resources, our people, to ensure that this is possible. We're investing more in technology. The quality of our solutions is improving regularly, and this makes things easier, and this is a necessary precondition in order to achieve growth. We have better processes. We're able to do things more quickly, more efficiently, more effectively. There's still a lot for us to do, no doubt about that. In our institutional business, we're not afraid of large amounts, especially if we're thinking about syndicate transactions, and we're able to do big transactions, complex transactions very quickly. This is a result of the quality of the people we have on board, as well as working together with the BNP Paribas Group, and this is a very strong corporate banking group.
If you look at our structure, you can see that this component of the business, the institutional business, is bigger than other banks from the peer group. We're a very strong corporate bank. We're stronger. I don't wanna mention the names of the competitors, but we're a stronger bank in this area. I think that the quality of our people, the spirit of growth, the investments we've made in technology, these are the things that drive us, drive our attractiveness that we have, and that's why we're growing faster. You were asking in particular about corporate. I don't really understand the aspect you want to ask about. I understand the first thing, but now the question about mortgages, is this an important thing in terms of your sales? Let me tell you, the mortgage loan market has basically fallen off dramatically.
If you look at the BLIK data, this was a decline of 55% year-on-year, and it's actually getting bigger and bigger, that dip, that decline. There are a number of factors that are driving that. First is interest rates and the cost of mortgage loans to be borne by borrowers. Many borrowers have decided not to take the loan because they believe that it's gonna be very difficult for them to finance that with their household budget. The next thing is creditworthiness. As we know, the creditworthiness is calculated using the current market interest rates plus a buffer. It's more difficult, and this is clear, for customers to have creditworthiness with this level of interest rates. We still have high level of prices for apartments and people who wanna build themselves, you have high cost to build.
All of those factors taken together mean that the mortgage loan market is at a dramatically low level. All those things, the fact that we've limited our willingness to give loans to our existing customer base and then thinking about green mortgages, well, this doesn't have material importance right now. I'm a pessimist. If we look at mortgage loans over the upcoming quarters, also for next year, much will depend on what's gonna happen in terms of the benchmark reform. There was an idea presented there, where if the benchmark reform would be pushed back in time, but then as of 1 January, banks should issue loans according to a new benchmark, where that benchmark hasn't been selected. This is something that could dissuade banks from giving loans on a floating rate.
Well, to think about this from a different approach, the mortgage loan has turned out to be a product where we've had the biggest non-credit risk materializing, the regulatory risk. If we look at Swiss franc loans or now Polish złoty loans or credit holidays, there's a bit of a shadow cast onto this product's image. We can say we have highly sophisticated consumer protection, we could say that this protection is excessive in some cases. That's why I don't foretell or see a beautiful rosy picture for mortgage loans. I wanted to talk about the fragile loans in the retail section. What type of clients were in this portfolio? I'll respond to the question. There are two segments. We were checking the creditworthiness of customers who are close to the borderline according to our scoring systems.
We also looked at people who had mortgage loans. With mortgage loans, the issue is as follows. Today, we have these credit holidays, and what we're discussing is credit holidays for all customers. Right now, in this pool of customers, we have customers who from the point of view of creditworthiness, their ability to service their debts, they don't need credit holidays. They have the ability to finance it. In my opinion, they're just taking financial benefit from this situation, and then they'll come back to the normal schedule of repayment, amortization schedule. There's certainly a pool of customers that need this help. Since the credit holidays are available, there'll be a shift. Today, they won't be in stage two or stage three because the credit holidays are available.
When this comes to an end, this will be the end of next year. If interest rates don't fall by that time, well, then there's a certain probability that those customers could potentially face problems with paying down or servicing their liabilities, and then they would move into stage two or stage three if their income doesn't grow in the meantime.
Okay, thank you.
Let's go on to questions from the online environment. Structurally, I'm going to overlook questions about the number of applications for credit holidays, with a few exceptions. We'll try to respond to the other questions. We have a question here from Thomson Reuters. I already responded to that question. We have, what's the demand for mortgage loans with fixed interest rate for 10-year period ? In Q2, generally speaking, in Q2, we can say that fixed loans were fixed interest rate loans.
It was interesting that when interest rates were low, there was only marginal interest now that rates are up. Now there's more interest in fixed interest rates. The fixed interest rate, so it's 56%, you know, for a five-year period, and then the rest was in floating rates. Thank you very much. What's the impact on mortgage loan sales? In Q2, what was the impact of the bank's decision just to give it to existing customers? There was almost no impact because we announced this decision in Q2, but we were processing applications submitted earlier, so it was a marginal impact or no impact. We have, I was just supposed to move to the product category with a question here.
I'd like to ask what is the impact of the credit holidays on the mortgage sales? I think we already mentioned that. We also talked about the supply of these loans. You had said that you've been selling more payment cards. Why do you see the impact? Does that mean that Poland is starting to lack liquidity? I don't think that's the reason. I think it's this instrument is very convenient, especially during holidays, and sometimes it's necessary because if you wanna rent a car or you wanna rent a hotel room, so there's more interest in payment cards. Our payment cards have a nice functionality, so we are betting on this product, and it ties customers to the bank, and we would like for our customers to have attractive products, and that's why we believe in these products, these payment cards.
You talked about M&A transactions financed by the bank. What sectors do you see as this consolidation in the bigger transactions in the second half of the year? Where do you see them taking place? I don't think it's a sector-based thing. Of course, it could be a matter of generational issues where the founders of businesses, of companies and businesses, people who are setting up their companies at the beginning of the transformation in Poland are now reaching an age where they don't feel that they should continue to manage these businesses actively. Now they're thinking about passing the torch on to somebody else through an M&A transaction, or perhaps they would be willing to take a company to go to the market.
Well, this is not so much specific to a given industry. In terms of what's gonna happen in the second half of the year, we'll have to wait for the second half of the year to find out what happens. I think that's it. We also have a question from Tom Sanders. Do you plan to take actions to reduce the costs of credit holidays? I'd like to take that offline. I'd like to understand what sort of activities could be taken, because the law, and you have the Office of Consumer Protection, doesn't leave us much room. We had to implement this in a fair way. I'd happily learn about the methods you could use to reduce these costs. Basically, once interest rates fall, and then we'll have a positive impact from these credit holidays, but we'll have to wait and see.
Here's another question about credit holidays. In terms of the low probability of paying dividends, is this because of the WIBOR reform? Well, we've been saying the credit vacations or holidays have an impact because they're charged to the result, the net banking income, and do not enable us to raise the level of equity. I don't think the WIBOR reform has any impact on our not being able to pay a dividend. Now, EPPI, what is the impact of new regulations in terms of not charging additional fees until a mortgage is placed in the land and mortgage register? Well, this is not a material impact. If we talk about the future, with such a low level of production of mortgage loans, we can say this is something that will be totally marginal. We talked about the Borrower Support Fund.
Having in mind the solutions in Q2 linked to the pandemic, does the bank have additional ability to set up provisions linked to COVID that you could release and reverse in upcoming quarters? Well, some perhaps, you, Wojtek, in terms of the COVID provision, well, it's been reversed to zero, the pure COVID provision. This is what I said previously. If we look at a forward-looking approach, there are certain provisions set up for fragile customers, plus for customers where the inflation could have a major impact through the interest rates and severing supply chains. These are things which are in the bank's balance sheet in terms of provisions. We have another question. We have the number of litigation is growing in Q2. What could be the impact of provisions? Well, this is what we've just said. We're monitoring this situation on an ongoing basis.
We add new provisions. We added PLN 140 million in provisions in Q2. Depending on the situation, we'll react. We'll react with how the situation develops. I wanted to draw your attention to the fact that we have this pilot project of entering into settlement agreements, and we're doing better and better here. We have the peak on the interest margin. We have a question to Jean-Charles from IPOPEMA.
Needs in 2022 and 2023. We have some estimates, but we also have discussions in progress about MREL level. I would prefer not to give an estimate in such context.
That was the last question online. This is the last time for you to pose a question from here in the room. I see there is a question from here in the room.
I have a question about the impact of these credit holidays. If you could tell us, what are gonna be the long-term consequences in terms of margins? Because the loan margins, because the bank's gonna have to incorporate that in the margins. What's gonna be the carry on impact in terms of being surprised by what's happening in the regulatory sphere?
Well, that's a very broad question. About this sector's policy, I think the sector would like to sit down at the table with the public party broadly represented and talk about that in a human fashion.
I think we should say the sector should be able to talk to the actual circumstances the way it is. We should also try to convince the public party that we're not gonna be able to withstand or endure any more burdens. Number three, that we wanna be a partner in terms of various things. We helped in during the pandemic when we were distributing funds from PFR, and nobody asked for any money for that. We did that quickly and efficiently. Just now with IPS or the commercial bank protection system, we want to be a partner. We wanna work together. We wanna do initiatives together. We'd like to sit at a round table. We'd like to ask for a change in the narrative. As I said previously, I think that's about it. Thank you very much.
I have a sign that we should wrap things up now. I'd like to thank you very much for attending here physically, and I'd like to thank those of you who participated digitally. Until next time. Thank you.